"Pension funds need 7, 8 percent type returns, and you're not going to get it from bonds," he said. "And stocks are probably not going to do well enough to make up the difference. So hedge funds look attractive, but there's too much money."

On "Fast Money," the founder of SL Advisors and author of "The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True" said that they hedge fund was overcapitalized.

"You know, $2 trillion, 7 percent return expectation. That's $140 billion a year before fees, $200 (billion) after fees," he said. "Hedge funds have never made that much money in a year. The world's not that inefficient. And so it's not going to end well for a lot of these pension funds."

Lack acknowledged that there were hedge funds that were above average.

"There are great hedge funds and happy clients, but I think there's too much money in the industry overall to achieve the objectives that people have," he said.

Lack, who spent 23 years at JPMorgan and worked in North American Fixed Income Derivatives and Forward FX trading, sat on the company's investment committee, allocating over $1 billion to hedge fund managers.

"In 2008, hedge funds lost all of the money they had made in history before that," he said. "I used to look hedge funds before 2008, and I'd say, 'What's a bad year going to be like?' And they'd say, 'Oh, you know, down 10 percent'll be really bad.'"

Lack also took a shot at fees charged by hedge funds, commonly clocking in at a 2 percent management fee and 20 percent of gains.

"Everybody knows that fees are ridiculous," he said. "I worked out in my book, 98 percent of all of the profits that were made by the hedge fund industry went in fees to managers and fund to fund. So hedge funds made a lot of money. They just didn't make it back to the clients. They stayed within the industry. So, obviously, fees are just wrong. I mean, they're at a knuckleheaded level."

Trader disclosure: On March 19, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Josh Brown is long AAPL; Josh Brown is long GDX; Josh Brown is long JPM; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long GOOG; Josh Brown is long LULU; Steve Weiss is long BAC; Steve Weiss is long C ; Steve Weiss is short VALE ; Steve Weiss is short RIO; Steve Weiss is short BHP; Joe Terranova is long VRTS; Joe Terranova is long SJM; Joe Terranova is long MJN; Joe Terranova is long SCCO; Joe Terranova is long AAPL; Joe Terranova is long PANW; Joe Terranova is long VSI; Joe Terranova is long AXP; Joe Terranova is long GPS; Joe Terranova is long KORS; Joe Terranova is long GS; Joe Terranova is long SWN; Joe Terranova is short S&P Mini Futures; Simon Baker is long BAC; Simon Baker is long C ; Simon Baker is long WFC; Simon Baker is long CSCO; Simon Baker is long GOOG; Simon Baker is long EBAY; Simon Baker is long AMZN; Simon Baker is long FDX.